The Belgian chemicals sector is expected to grow in 2015, helped by a weaker euro, lower oil prices and a eurozone rebound.

Market performance snapshots

Belgium

Payments take 30 days on average

Growth expected to continue in 2015

Weakening competitiveness due to high labour costs

In international comparison, the Belgian chemicals sector benefits from a very high degree of specialisation. It includes a wide range of segments, from basic organic and inorganic products to pharmaceuticals, biotechnology, products for agriculture, paints, glues, detergents, cosmetics, rubber and plastics processing and many other specialty products such as chemicals for the photography industry. Chemicals (including pharmaceuticals) account for about 23% of the Belgian manufacturing sector, employing about 87,000 people directly and 144,000 people indirectly. More than 75% of the production is exported, and chemicals account for more than 30% of Belgian exports.

After growing in 2013, the Belgian chemicals sector continued its good performance in 2014. According to the Belgian chemicals association Essenscia, turnover increased 2.4% year-on-year in 2014, to EUR 64.2 billion, due to an increase in volumes as well as higher sales prices. In general, the chemicals sector was able to pass on higher raw materials and energy prices to end-customers. Investments amounted to EUR 1.78 billion (30% of total industrial investments in Belgium). Persistently high investments and high research and development spending are core strengths of this industry.

Compared to other Belgian sectors, the general equity, solvency and liquidity strengths of chemicals and pharmaceuticals companies continue to remain above average. Payments in the Belgian chemicals sector take 30 days on average. The number of payment delays is low, and expected to remain so in 2015. Insolvencies are expected to decrease further in 2015, however below the 6% decline forecast for all Belgian business insolvencies, given the already low number of insolvencies in the chemicals sector. Growth is expected to continue in 2015, helped by a weaker euro, lower oil prices and a eurozone rebound.

However, despite its structural resilience, the Belgian chemicals sector also has some weaknesses: competitiveness is weakening due to the fact that labour costs are among the highest in Europe and competition from China has increased. At the same time, the high export-dependency makes the Belgian chemicals sector susceptible to international risks, such as a potential further escalation of the crisis in Ukraine and the Middle East, a hard landing in China, or a return of the eurozone crisis (e.g. either by Greece leaving the eurozone or a deflationary spiral and liquidity trap).

That said, given the currently robust performance, financial health and low insolvency rate, our underwriting stance remains relaxed for the time being. Buyers are reviewed at least once a year on the basis of new accounts or when new information is received. The latest balance sheet is always requested and we also seek to obtain interim results from more sensitive buyers.